This paper illustrates the use of the marginal cost of public funds concept in three
contexts. First, we extend Parry’s (2003) analysis of the efficiency effects excise taxes in
the U.K., primarily by incorporating the distortion caused by imperfect competition in the
cigarette market and distinguishing between the MCFs for per unit and ad valorem taxes
on cigarettes. Our computations show, contrary to the standard result in the literature,
that the per unit tax on cigarettes has a slightly lower MCF than the ad valorem tax on
cigarettes. Second, we calculate the MCF for a payroll tax in a labour market with
involuntary unemployment, using the Shapiro and Stiglitz (1984) efficiency wage model
as our framework. Our computations, based on Canadian labour market data, indicate
that incorporating the distortion caused by involuntary unemployment raises the MCF by
25 to 50 percent. Third, we derive expressions for the distributionally-weighted MCFs
for the exemption level and the marginal tax rate for a “flat tax”, such as the one that has
been adopted by the province of Alberta. This allows us to develop a restricted, but
tractable, version of the optimal income tax problem. Computations indicate that the
optimal marginal tax rate may be quite high...

Services have a direct impact on the
competitiveness of the goods sector. This paper illustrates
the importance of logistics services, their trade dimension,
and how regulatory issues act as perhaps one of the most
significant barriers to competitiveness. The paper discusses
recent developments and the role and benefits of logistics
services and argues that from a trade agreement standpoint,
logistics is a network industry that ultimately provides one
service to a final client. It analyzes logistics services
from a services trade perspective and proposes that trade
agreements should ensure access to and use of the
infrastructure required to provide these services
recognizing their interconnectedness. The paper offers
suggestions on additional policies World Trade Organization
members, and countries negotiating services agreements
regionally or bilaterally, could follow in order to fully
exploit the opportunities provided by logistics services.
Local regulations and complementary policies in areas such
as trade facilitation will always remain important.

The purpose of this tool is to help the
reader understand the structure, design, and administration
of tobacco taxes. There is no doubt about the adverse health
impacts of tobacco use. In both developed and developing
countries, the Ministries of health, tobacco interest
groups, academia, and advocates against tobacco strongly
believe that tobacco consumption should be reduced, and that
tobacco taxes are the single most cost-effective policy tool
to achieve this goal. This tool discusses some of the issues
surrounding tobacco taxes from the perspectives of
consumers, public health advocates, politicians, and
government administrators. Guidance is provided in how to
satisfy the goals of these players without compromising
their interests. This tool is intended primarily for public
health advocates, policy makers, tax administration staff,
and government officials. Public health advocates will gain
information on the various types of tobacco taxes and which
type can best reduce cigarette consumption. The tool also
discusses whether and how increased tobacco taxes create a
financial burden on consumers...

Currently there are approximately 4
million tobacco related deaths annually. If present trends
continue, by the year 2030 the number of deaths will soar to
about 10 million annual deaths, with 7 million in low-income
countries. However, government action to establish various
tobacco control initiatives can prevent this from happening
and save a significant number of lives. Tobacco control
measures include: i) raising tobacco prices by imposing
higher excise taxes; ii) advertising and marketing bans and
restrictions; and iii) clean indoor air provisions. A
popular and valid concern holds that raising tobacco excise
taxes for the purposes of tobacco control imposes an
untenable and unfair burden on the poor. In short, it is
argued that higher tobacco excise taxes increase inequality
in the post-tax distribution of income and reduces the real
incomes of a particularly vulnerable group, the poor. This
tool discusses a number of approaches in which to examine
the validity of this argument. Techniques to analyze the
impact of tobacco consumption and tobacco taxes on the poor
are explained. And analytical methods using country-specific
data are examined so that policy analysts can effectively
address concerns about the poor...

Despite the widespread tariff reductions
sparked by the Dominican Republic-Central America Free Trade
Agreement, borders in the region remain thick, with many
hurdles standing in the way of regional trade. Although
anecdotal evidence suggests that nontariff measures raise
trade costs and inhibit trade in the region, little is known
about the magnitude of these economic effects. This paper
uses a newly collected data set to quantify the incidence of
sanitary and phytosanitary measures and technical barriers
to trade in the region and benchmarks it with other parts of
the world. The results indicate that the Central American
region has the lowest prevalence of technical nontariff
measures in the world. However, there is significant
heterogeneity of trade-related regulations in Central
America; for instance, 48 percent of Salvadoran imports are
subject to at least one nontariff measure, compared with
just 16 percent of Honduran imports. The paper estimates the
impact of these technical measures on border prices and
finds that the price impact of sanitary and phytosanitary
measures is equivalent to an ad-valorem tariff of 11.6
percent. This price-rising effect is further investigated by
looking in detail at the impact of sanitary and
phytosanitary measures on the prices of beef...

There is substantial evidence that with
the progressive global decline in tariffs over several
decades, trade costs are a more significant barrier to trade
than tariffs, especially in Sub-Saharan Africa. This paper
decomposes trade costs into three categories: costs that can
be lowered by trade facilitation, nontariff barriers, and
the costs of business services. The paper develops a
10-region, 18-sector, global trade model that includes
Kenya, Tanzania, Uganda, and Rwanda of the East African
Customs Union. The analysis finds that deep integration in
the East African Customs Union that lowers these trade costs
results in significant gains for the four countries,
especially from improved trade facilitation. Extending the
lowering of nontariff barriers and services liberalization
multilaterally would increase the gains between two and
seven times, depending on the country. that the analysis
also finds that reducing nondiscriminatory services barriers
in Kenya and Tanzania would increase welfare even more than
multilateral reduction of discriminatory services barriers.
The paper is innovative both conceptually and empirically.
It contains foreign direct investment in services and is the
first paper to numerically assess liberalization of barriers
against domestic and multinational service providers in a
multi-sector...

A new database on the barriers faced by
foreign suppliers of services has been produced by the World
Bank. Data for 103 countries are available on 11 of the most
important services sectors in international trade. Based on
these data and building on the methodology and publications
supported by the Australian Productivity Commission, this
paper produces estimates of the ad valorem equivalents of
the barriers for all these sectors and countries. Compared
with estimates available in the literature that are based on
assessments of country- and sector-specific barriers to
services providers, the estimates expand the set of sectors
and more than triple the set of countries for which
estimates of the ad valorem equivalents of the services
barriers are available.

There is a common perception that trade liberalization unlocks welfare gains. Consequently, politicians have undertaken a huge effort to abolish tariff barriers. Trade impediments, however, may appear in various guises. In their survey article, Anderson and van Wincoop (2004) argue that trade costs other than direct policy measures are important. Among others, they refer to costs associated to regulatory barriers, the lack of enforceable contracts, and information barriers. In total, trade costs of an average rich country amount to an alarming 170% ad valorem tax equivalent. This doctoral thesis aims at contributing to the ongoing process of unpacking various typed of trade costs.
Technical barriers to trade. Technical barriers to trade (TBTs) may play an effciency-increasing role. This result arises in a model where the degree of external scale effects can be parameterized independently of the elasticity of substitution. Then, there is a second-best rationale for the existence of TBTs since they can be used as an instrument to restrain excessive entry of monopolistic firms.
Information costs. Using newly available panel data on developing countries diaspora to rich OECD nations in a theory-grounded gravity model, it uncovers a robust...

If tax obligations are met, the balanced-budget substitution of an ad valorem tax on output for a specific tax not only raises a monopolist's production, but also represents a Pareto improvement. However, if tax avoidance or evasion is feasible and the marginal costs of such actions decline with the legal tax burden, a monopolist will respond to a balanced-budget substitution of an ad valorem tax for a specific tax by reducing output, while profits remain constant. Therefore, in the presence of tax avoidance or evasion activities a move towards specific taxation can represent a Pareto improvement.

Two of the most important trade policy
developments to take place since the 1980s are the expansion
of preferential trade agreements and temporary trade
barriers, such as antidumping, safeguards, and
countervailing duties. Despite the empirical importance of
preferential trade agreements and temporary trade barriers
and the common feature that each can independently have
quite discriminatory elements, relatively little is known
about the nature of any relationships between them. This
paper surveys the literature on some of the
political-economic issues that can arise at the intersection
of preferential trade agreements and temporary trade
barriers and uses four case studies to illustrate variation
in how countries apply the World Trade Organization's
global safeguards policy instrument. The four examples
include recent policies applied by a variety of types of
countries and under different agreements: large and small
countries, high-income and emerging economies, and free
trade areas and customs unions. The analysis reveals
important measurement and identification challenges for
research that seeks to find evidence of systematic
relationships between the formation of preferential trade
agreements...

China finds itself in a unique situation
on antidumping and safeguard issues. It is by far the main
target of antidumping measures, but (so far) one of the
smallest users of such measures. China's World Trade
Organization (WTO) accession protocol includes stringent
antidumping and safeguard provisions that its trading
partners may use against its exports. The article examines
three related concerns: how quickly large developing
economies can become intensive users of antidumping
measures, an evolution raising concerns about China's
recent antidumping enforcement; how China could minimize its
exposure to foreign antidumping cases, a recipe for both
improving trade outcomes and for China's taking a
leading role in reforming WTO antidumping; and the
opportunities that the Doha round of trade negotiations
offer to China for negotiating stricter disciplines both on
WTO contingent protection and on the use by China's
trading partners of the special provisions included in
China's accession protocol.

The Russian tariff structure contains
over 11,000 tariff lines of which about 1,700 use the
so-called "combined" tariff rate system. For the
combined system tariff lines, the actual tariff applied by
Russian customs is the maximum of the ad valorem or specific
tariff. The lack of available data and the difficulty in
calculating the ad valorem equivalence of the specific
tariffs have resulted in some previous efforts that have
simply ignored the specific tariffs. This is the first paper
to accurately assess the tariff rates. The authors show that
ignoring the specific tariffs results in an underestimate of
the actual tariff rates by about 1 to 3 percentage points,
depending on the year. The average tariff in Russia has
increased between 2001 and 2003 from about 11.5 to between
13 and 14.5 percent, but it has held steady in 2004 and
2005. This places Russia's tariffs at a level slightly
higher than other middle-income countries and considerably
higher than the OECD countries. The trade weighted standard
deviation of the tariff approximately doubled from 9.5
percent in 2001 to 18 percent in 2003...

The main objective of this work is to investigate if there are and what are the principal features in the business cycle of ad valorem tax's growth rate. To do that, Markov-switching and threshold models were used to estimate and analyze the business cycle in the monthly growth rate of Ceará's ad-valorem tax and to forecast. The results show that there are three regimes in the business cycle on the variable under analysis, and the growth rate of tourism and industrial activity may be used as threshold variables, which gives information about Ceará's ad-valorem tax business cycle and its future values.; O objetivo principal deste trabalho é investigar a existência e as principais características de ciclos econômicos na taxa de crescimento do ICMS. Para alcançar esse objetivo, modelos de mudança de regime de Markov e com efeito limiar (threshold) foram utilizados para quantificar e analisar os ciclos econômicos na taxa de crescimento mensal da arrecadação do ICMS no Estado do Ceará, bem como realizar previsões para esta variável. Os resultados indicam que o ciclo econômico da variável em questão apresenta três regimes (decrescimento, crescimento moderado e crescimento acelerado) e que a taxa de crescimento da demanda turística e da atividade industrial serve como variáveis threshold...

The objective of this paper was to analyze, explicitly, the effect of tariffs and non-tariff barriers (NTBs) on the Brazilian exports and its contribution to the border effect. It was used a gravity model with a procedure to calculate the tariff equivalent of non-tariff barriers. In the simplest model, estimated border effect showed that Brazilian states trade on average 33 times more among themselves than with the rest of the world. Explicit introduction of tariffs in the model showed that exports suffered a greater reduction than the increase on tariffs. The isolation of the influence of tariffs on the border-effect indicated that Brazilian states would still trade 26 times more among themselves. The calculated tariff equivalent of non-tariff barriers showed that those NTBs correspond to a tariff ad valorem of approximately 29%.; O objetivo desse trabalho foi analisar, explicitamente, o efeito das tarifas e das barreiras não-tarifárias (BNTs) nas exportações brasileiras e sua contribuição para o efeito-fronteira. Utilizou-se um modelo de gravidade e um procedimento para calcular o equivalente tarifário das barreiras não-tarifárias. No modelo mais simples, o efeito-fronteira estimado mostrou que os estados brasileiros comercializam...

Fonte: London School of Economics and Political Science ThesisPublicador: London School of Economics and Political Science Thesis

Tipo: Thesis; NonPeerReviewedFormato: application/pdf

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This thesis is made of five different chapters. Chp 1: OPTIMAL FISCAL AND PUBLIC EXPENDITURE POLICY IN A TWO CLASS ECONOMY This paper deals with optimal taxation and provision of public goods in a two-class economy with non linear income and linear commodity taxes. As far as optimal taxation is concerned, we first show that with two private goods the good complementary with leisure should be taxed more heavily. Second the standard income tax rules are shown to be augmented by considerations for offsetting the distortions created on the commodity markets. As to the provision of public goods we extend recent results for a two class economy with public funds raised entirely by means of a non-linear income tax system. The standard Samuelson rule is modified by two additional terms related to the self selection constraint and to the revenue of indirect taxes. They are both shown to vanish when the agents' utility functions are weakly separable between public and private goods (taken together) and leisure. Chp 2: DIRECT AND INDIRECT TAX EVASION: A SURVEY OF THE LITERATURE The purpose of this selective survey of the literature on both income and commodity tax evasion is to show in which directions, the literature has evolved. Two main approaches are identified for both direct and indirect tax evasion literature. The so-called taxpayer's point of view approach which is basically an exercise of maximization under uncertainty and the so-called tax collector's point of view which is a refinement of the Mirrlees-Stiglitz approach to income taxation and of the Ramsey approach to commodity taxation. The current state of the art is such that both approaches share similar strengths and weaknesses. Chp 3: TAX STRUCTURE...